Wales sees drop in its growth but capital gets core place
THE Welsh economy has grown this year on the key gross value added output measure at just 1%, compared to 1.1% in 2017, shows new research.
However, in the latest regional economic forecast from professional advisory firm EY, Wales is expected to recapture some ground with a projected annualised growth rate over the next three years of 1.4% – although this is still lower than the UK average of 1.7%.
EY said that city growth typically outpaces national and regional growth.
Cardiff is named as one of the eight core cities in EY’s report, and is growing ahead of Wales in terms of its economic performance, with expected average GVA growth of 1.8% over the next three years and employment creation of 1% (compared to 0.4% in Wales).
EY has not projected what GVA growth could be on an annual basis up until 2021.
Andrew Perkins, managing partner at EY for Wales and the south west of England, said: “In the case of Wales, its weaker GVA performance just strengthens the case for driving deeper geographic rebalancing to maximise the potential of all the UK’s regions and cities. Brexit makes this policy even more important, both to maximise growth but also to support the UK’s transformation to be in a position to prosper after Brexit.”
According to the report, UK growth is set to become more geographically balanced over the next three years.
However, this rebalancing will principally be the result of slower growth in the services sector, which will have a detrimental impact on the south of the UK, rather than other regions “catching up” through an improved performance.
The UK economy is growing slower than its historic trend – with annual growth of 1.7% a year to 2021, more than half a point lower than trend. London will continue to outperform all other UK regions through to 2021, but in the three years since EY’s first regional forecast, there has been no reduction of the imbalances between the south of England and the rest of the UK
EY’s analysis of eight core cities in the UK (Birmingham, Bristol, Cardiff, Leeds, Liverpool, London, Manchester and Newcastle upon Tyne) saw growth of 2.2% annually on average between 2015 and 2018, whereas large towns grew at 1.8%.
EY expects this distinction to continue with growth rates of 1.8% for core cities and 1.6% for large towns over the next three years.
The UK’s strongest performing cities will continue to grow faster than average, however the gap to the slower growing areas will be less than in the recent past with little more than a 1% difference in average annual growth rates between the fastest and slowest growing locations.
EY expects the rate of employment growth to be around 0.5% per annum on average over the next five years, compared to over 1.4% in the five years to 2018 – a major change in pace.
A slowing economy, expected reduction in immigration and technological change are all contributing to this anticipated shift in the labour market over the coming years.
The report says a slowdown in the retail sector, especially on the high street, also poses significant challenges for smaller towns and communities as retail tends to be a major employer in these locations.
There are also similar challenges facing the manufacturing sector. The sector has grown over the last three years and employment has increased as a result.
However, it is expected to grow more slowly over the next three years as technology is used to drive productivity in a more challenging labour market.
Mr Perkins said: “This report demonstrates how geographical imbalances not only remain within the UK economy, but are actually widening at a local level within all regions of the UK.
“With smaller places more vulnerable to economic downturns it is critical that we start to develop policy now to drive greater balance and security in economic activity across the whole of the UK.
“This is an opportunity for geographic rebalancing to an extent, but the national approach to geographical rebalancing must identify how to ensure that smaller cities and towns, and the more remote parts of regions, can benefit from the success of the faster-growing cities. Improving connectivity, both physical and digital, will be critical in ensuring the economy is one in which everyone has a chance to participate fully, regardless of location.”